The Bitcoin price is under intense pressure. BTC has crashed in the past three consecutive days and is currently trading below $50,000. It is at the lowest it has been since March 7 and has dropped by more than 25% from its highest level last week.
What happened: The Bitcoin price surged to almost $65,000 last week as investors cheered the Coinbase listing. Shortly afterwards, the buy the rumours and sell the news dynamics came in and the price crashed to $56,000 during the weekend. It attempted to pare back some of the losses but it seems like bears have prevailed.
There are three dynamics moving the BTC price today. First, there are valuation fears since most investors believe that the price rose too fast. In an interview this week, Rick Rieder, the current bond king lamented that the market had become relatively complacent. While his statement was focused on stocks, the same could be said of cryptocurrencies.
Second, the Bitcoin price has dropped after Joe Biden proposed a doubling of capital-gains taxes. While US investors already pay taxes for their crypto returns, doubling would have negative consequences. Finally, the currency dropped because of regulatory fears.
Looking at the daily chart, we see that the BTC price has been under pressure lately. It has dropped in seven of the past eight days and erased more than 25% of value. This decline is partly because of what I warned last week, when I pointed to the rising wedge pattern that is shown in pink. It has also moved below the 25-day moving average and is facing strong support at the 100-day EMA.
Therefore, if the sell-off continues, the next key support to watch will be $40,000, which is about 20% below the current level. However, a move back to the rising wedge pattern will invalidate this trend. In the longer-term, however, the bullish trend remains intact.
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